Krungthai Bank (KTB), the country's fourth-largest lender by assets, expects total loan growth this year to fall short of its 6-7% target after the bank tightened lending to cooperatives to improve asset quality.
The recent disposal of non-performing loans (NPLs) for small and medium-sized enterprises (SMEs) is another reason for the significant decline in loans outstanding, said president Payong Srivanich.
The bank's loans to cooperatives have declined by 50 billion baht year-to-date, he said.
During the first half of the year, the bank's loans outstanding rose by 1.2% from the end of last year to 1.88 trillion baht. The loan expansion was mainly attributed to government and state enterprise loans, which experienced 20.4% growth, and retail loan expansion of 3.7%. SME and corporate loans shrunk 3.1% and 3%, respectively.
Year-to-date wholesale loans grew at a stronger pace than retail loans.
Although SME loan growth contracted for the six months to June, it is improving and the bank expects to record positive growth at the end of the year. KTB expects loans to the government and state enterprise sector to grow by 20% this year, Mr Payong said.
The bank's gross NPL ratio fell to around 4% from 4.25% at the end of June, partly due to bad loan write-offs.
Yesterday KTB joined with the Government Pension Fund (GPF) to introduce a package for personal loan products, called Krungthai Tanawat, for the pension fund's members.
KTB offers an interest rate of 7.25% during the first three years, below the normal rate of 10.6%. The maximum credit line doubles to 10 times borrowers' monthly income, from five times on average.
Mr Payong said Krungthai Tanawat's total loan portfolio amounts to 100 billion baht, with an NPL ratio below 1%.
The loan product is exclusively offered to civil servants that receive salaries through the bank, but it will be extended to all GPF members, he said.
KTB will also offer other financial services to the fund's members under the cooperation, Mr Payong said.
In the meantime, GPF secretary-general Vitai Ratanakorn said 250,000 members have taken out Krungthai Tanawat loans.
With the offer for special interest rates, the GPF could lower financial expenses throughout the loan term by 17,000 baht on average.
Mr Vitai said the GPF will collaborate with KTB to launch a special mortgage programme for GPF members in November and other financial products such as auto loans, deposits and mutual funds.
KTB shares closed yesterday on the Stock Exchange of Thailand at 19.40 baht, up 20 satang, in trade worth 429 million baht.